Fate of sweepstakes shops’ business licenses in hands of Myrtle Beach City Council

Mixed legal signals about sweepstakes parlors has five Myrtle Beach businesses wondering if their licenses will be revoked, forcing them to close their doors permanently.

Lawyers for five sweepstakes businesses in Myrtle Beach argued Tuesday that the licenses were suspended unjustly after city police and S.C. Law Enforcement Division officers confiscated computers in Five Stars Internet Café last month. Myrtle Beach business license inspector Mary McDowell suspended the licenses at four other Internet cafes that she said had similar machines.

Businesses with suspended licenses include: Five Stars Internet Café at 706 N. Ocean Blvd.; Winners Circle Amusements at 1780 and 1788 U.S. Highway 501; Ocean 7 Business Center and Sweepstakes located at 218 Seventh Ave. S.; and Kings Business Center and Sweepstakes located at 1106 N. Kings Highway.

In 2011, S.C. Attorney General Alan Wilson said the machines are illegal. In December 2012, Judge Larry Hyman dismissed a Georgetown County case against Murrells Inlet Sweepstakes.

Jonny McCoy, the attorney representing four of the five Myrtle Beach businesses, argued Tuesday that Hyman’s ruling meant the machines were legal.

The S.C. General Assembly is working to close what has been called a loophole in state law regarding gambling machines. Greg McCollum, attorney for Five Stars Internet Café, said the city should wait until a decision is made at the state level before revoking business licenses.

“If what Mr. Smith [owner of Five Stars] is doing is illegal, the legislature wouldn’t be debating if it’s illegal,” McCollum told council. “It’s not a gambling operation, it’s a sweepstakes like any other sweepstakes, like the ones at McDonald’s or Taco Bell.”

In November, Myrtle Beach appeared to have been taking the wait-and-see approach that McCollum seeks.

“While opinions may be that the devices are illegal,” city spokesman Mark Kruea told The Sun News in November, “the courts have yet to make a determination on that, so rather than have our zoning and business license personnel be in the position of saying, ‘Gee that’s an illegal device,’ we are provisionally issuing businesses license until a higher authority makes a decision.”

The city was issuing licenses to these types of sweepstakes businesses as recently as last summer, McCollum said, including to his client Jeff Smith. Smith said he knew there was some risk associated with opening his businesses in South Carolina. Smith said he also owns businesses in North Carolina.

“I knew the state legislature could pass new laws and it could affect my business,” he told council during the hearing.

Smith said his business serves as an Internet café, selling Internet access and food to those staying in nearby hotels. He said customers do not need to pay to enter the sweepstakes and pay to use the Internet. Some customers, he said, spend that time playing the sweepstakes games that are available on the computer. If a customer wins, he or she can cash out at the register.

Smith argued that those who pay for Internet time have no higher chances of winning as those who play for free and the outcome of the play is pre-determined.

But Mike Battle, who represented the city’s business license department, argued that the machines were games of chance that mimicked illegal poker machines with their cartoon screens and music.

“If it looks like a duck, quacks like a duck and lays golden eggs like a duck, then it’s a duck,” he said. “And the law prohibits games of chance.”

City Council is scheduled to decide if they will permanently revoke the business licenses at the meeting held at 2 p.m. on March 26.